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Billing statement amazon template for Manufacturing

hey badass business owners today we're going to talk about the basics of your profit and loss income statement because let's face it it can be very confusing because it looks like just a bunch of numbers on a page but i want to let you know that you need to know your business numbers and your profit and loss is your business's report card so it's really important you understand it because at the end of the day it is the piece of the puzzle that helps you unlock your profits so with that let's take a look now there's going to be a couple different versions of a p l that are out there don't get hung up on the way that yours happens to look they all have the exact same five key sections and that's what we're going to take a look at so you know what those five sections are the first section is the income line and the income section is going to be called either income sales or revenue basically it's all the money that is coming in to the business so if you're receiving money in any way shape or form it's going to be right here under the income section once again it'll say sales revenue everyone is a little bit different but most of the time it's going to be called income the second section that you need to worry about is your cost of goods this is one of the big ones and this is probably where most people make their mistakes and on other videos i dive into this section in detail to show you where those mistakes happen but we'll take a look here real quickly cost of goods is sometimes called cog so when you hear people talk about cogs or cogs what they're referring to is the cost of goods sold and this is all money spent on materials ingredients packaging and labor that is spent on creating the product or providing the service there's different types of labor and i'm going to talk about that here in a minute but for cost of goods just think of it this way if it is part of providing the product at all either making it or providing it if you're a service-based business it's going to be under cost of goods because really what you're selling as a service is the actual service which is the which is the service if you have products and you make those products then you're gonna have a higher cost of goods because you're gonna have to include the labor because you cannot make it without that person uh if you just turn around and you resell it then it's just the original cost to you to purchase that material now let me explain the labor hours a little bit better here because some people have them under cost of goods some people have them under expenses and the right answer is both depending upon what you're using it for your cost of goods section is going to have the labor if the product or service cannot be done without the labor so for example if i buy a bicycle and i turn around and resell it i'm only going to have the bicycle part itself i'm not going to have labor because nobody had to put that bike together but if i buy the parts to the bike and i have to have labor to assemble the bike then yes it's going to be included in cost of goods so the labor will be included if i ceiling fans not only am i going to have the ceiling fan if i provide it but i'm also going to have the labor hours to it because what people are paying for is the of the ceiling fan however it'll go under expenses if that labor supports the business for example it's office cashiers schedulers someone who's doing the bidding people who basically are not necessarily installing the product or creating or making the product so you will have labor in both areas depending upon what it is and by the way this also includes you because you are a lot of times the only employee in your business or you are one of the employees in your business even though you don't necessarily have a payroll because remember you get paid two different ways in your business the first one is as an employee for work done which i call it at a fair wage you're not paying yourself 50 bucks an hour if you would hire someone off the street for 15 20 25 bucks you're gonna pay yourself as an employee in your business at a fair wage and then you also get paid as the business owner however your business owner pay really doesn't occur until the business has a profit and then you are paid out of the success of the business through the profits and i'm going to show you more on that here when we get to that section so when you're looking at it keep that in mind now the third section is a little tiny line that says gross profit and your gross profit is basically your sales minus your cost of goods it's the money that's left over for all other business expenses retained earnings taxes and owners draw so what you do is you just take your sales minus those cost of goods and that's going to tell you what your gross profits are so a lot of times when you hear people talking they'll talk about their gross profits what they're referring to is the money they've made prior to paying anything else that they owe in the business so gross profits some people have a very high gross profit line some people have a very low what matters is what you take home at the end of the day which i'm going to show you here in a minute now let's just take an example here in this particular p l it's 36 000 we're in sales the cost of goods were 17 000 which means their gross profit is the 1873 so that's basically how gross profit line works the next big section is the operational expenses and this is going to have a lot of stuff under it as you can see here it's basically going to be all the other operational expenses to run the business so whether it's advertising it's repairs maintenance to the truck to your equipment credit cards insurance now you'll see payroll on here it's not only for the people that are part of payroll but you're gonna have a payroll service in a lot of cases in which case all the fees and taxes and things that you have to collect for payroll will be an operational expense because those are parts of owning the business for running the business which is why they're under operational expenses rent small equipment uniforms stuff like that so basically it's a catch-all for everything else that has not part of your cost of goods now the final section is called profits and this is the line we all love to see and we want to see a nice healthy one sometimes it'll say profit sometimes it'll say net income just know that they are the same thing at the end of the day they are the businesses profits now keep in mind it's the money the business made not necessarily you yes you are the business but the business still has business to do if you will all right the business has to spend this money on a few things before you can start taking money out of it and that's where this comes in it's going to go to three things first off you've got to pay your taxes it is money the business pays on the profits of the business and any money that you take out of the business because most of you are solopreneurs and you're going to take money out of the business so you're going to owe taxes so you need to make sure that you set aside enough taxes out of those profits to pay for all those taxes next thing you're going to have to do is have some retained earnings and this is money that you take out of those profits and retain it in the business to invest for the future growth like maybe you need to buy some more inventory maybe you need to build up three to six months of emergency fund whatever the case may be you want to buy a special equipment those are retained earnings that's money you keep in the business and then if after you saved your money for your taxes and you retained earnings there's money then there's what's called an owner's draw and this is the money that you take out of the business some people choose to leave all of the money in the retained earnings some people choose to take all the money the one mistake you want to make sure you don't make is that you spend all the money that is supposed to be for taxes please make sure you take at least 20 to 30 percent off the top of these uh profits set it aside in a separate account because it's going to save your height it's one of the biggest mistakes small business owners make is they don't pay their taxes so you want to make sure all those profits you're saving for that now your p l statement is basically the flow of money through your business as you can see we started off with sales then we went to cost of goods and then what we did is we took off the expenses and finally we ended up with our profits this is the number one calculation that i tell people that they need to know sales minus cost of goods minus expenses equals profits you're going to notice already that this is how the flow of your p l goes i don't have gross margin in here because all it is doing is telling you a snapshot between the sales and the cost of goods the reason i want you to memorize sales minus cost of goods minus expenses most profits those were the big buckets of where money was coming out of the business as it was flowing through the business and what we saw is it's a huge deal on your profit and loss statement but guess what when you price your products and your services your p l will hold the key to you pricing correctly because when you spend money since your top line is sales every sale you make every product you sell service that you sell will have the same flow of money through it so if you always remember sales most customers months expenses equals profits you can actually set your pricings to ensure that you're going to have some profit it's also a great tool to see if you can afford something like if you want to hire some people get some equipment some advertising it's another great tool that you can use and by the way i have a bunch of videos on your pnl where i walk through each of these different scenarios to show you how you can use this but today all we're trying to do is make sure that you can understand the basics of your profit and loss statement and just remember you have these four sections right you have your sales minus your cost of goods minus your expenses equals your profits and yes we can sit there and we do have let me get my little mouse over there we do have the gross profit line all it is is just letting you know the difference between these two here but your four main sections are sales minus cast to goods minus expenses equals those profits and if you're a small business owner you might watch some other videos and there's a lot of other little lines in here trust me at your size you're not dealing with all those the only things you really need to remember are sales must cost as much expenses most profits when you start to hit the big time we can teach you about all those other fun lines that you hear the ibidas then all that other stuff that people talk about uh it's just basically this thing on steroids and you can learn that as you become bigger and bigger but for now the vast majority of you and ninety-nine percent of what you do anyways is sales must cost you as much expenses equals profits now let's take a quick example of the pricing like i was telling you let's say you sell something for fifty dollars you know your cost of goods run you about twenty five dollars you know that you need to set aside about ten dollars in expenses your p l by the way will tell you that because your piano will have a percentage of what your expenses typically run in which case you can take the sales price of fifty dollars times that percentage in this case let's say their expenses ran twenty percent this business owner knows that ten dollars is going to have to be set aside to pay their expenses now they know that their profit on this particular item is going to be 15 i know that sounds really confusing if you're watching my videos for the very first time but i promise you if you watch the profit and loss videos and the pricing videos this will make a lot of sense uh now your p l it's basically telling you the story of your business at the end of the day you don't just hand a book over to a kid and tell them to read it no you're going to show them teaching the alphabet you're going to teach them how to spell a word then you're going to teach them how to put a sentence together to read a book well your numbers are the same way we want to make sure that you understand those numbers because once you understand the numbers and how they look on that piece of paper and what they're telling you you then can start seeing the story of your business and it starts telling you all kinds of really really cool stuff matter of fact you can get your p l by month you can do it by year you can compare this year to last year month to month and it's going to tell you all kinds of really cool stuff about your business and how you can make more money because you can look for trends you can compare the year prior you can view seasonality you know when your best months are when your lowest months are you can set aside profit for one time of the year versus another it's really cool it really is the key to you uh earning more profit so it's really important that you understand your profit and loss statement don't complain if you don't have any profits if you don't have any profits and you're not doing anything about it then that's really on you because you really need to understand your business numbers because after all didn't you want to create a business not just a job and when you don't know your business numbers really all you're doing is creating a job for yourself because yeah you're making sure you get paid but you don't really know if the business is making you any money you're just ensuring that you're getting paid as an employee and we want you to be business owners and really understand how that works and by the way like i said if you like what you see don't forget to subscribe hit the like button all that cool stuff but more importantly make sure you watch some of these other videos that are on the screen where we take a deeper dive into your profit and loss statement and it's going to help you out tremendously i'll see you on the next video